Budget smartphones all the rage as punters look sub-£100

Nearly half of the world’s largest smartphone market will consist of handsets under $200 (£127) by 2015 as local device makers and web firms compete to drag the great unwashed into the 21st century, according to analyst Canalys.

On the eve of Mobile Asia Expo in Shanghai this week, the stats once again confirm that the bread and butter of the handset business is a world away from the shiny glass, polycarbonate world of the Galaxy S III and its ilk.

Canalys predicts, as do most other analyst houses, that the low-end is driving smartphone growth in China, pointing out that even the cost of entry-level devices like the Lenovo A65, dropped in the past few months.

Research director Nicole Peng said the A65 came down from around 1,000 yuan (£100) in Q4 2011 to around 700 yuan (£70) in the first quarter of this year.

She referenced local players such as Yulong, Gionee and K-Touch entering the smartphone space with the advantage of strong operator relationships and channels.

Price competition is also being increased by the entry of web firms like Alibaba and Baidu into the mix. These players are not expecting big profits from handset sales and are even able to discount devices with the aim of driving users to their online services.

Prices are also coming down thanks to operators updating their minimum hardware specs for low-end devices, the analyst said.

However, despite the huge size of the mobile market in the PRC, Taiwanese ODMs don’t appear to be especially chomping at the bit.

Industry sources told Digitimes that manufacturers across the Straits are not rushing to snap up contracts to build sub-1000 yuan phones because orders are unsteady and there is the risk that the Chinese vendors may look to slash ODM prices.

Whatever happens, the Canalys figures are yet another nail in the coffin of the feature phone market, after mobile chip giant MediaTek recently moved to focus its efforts away from these low spec devices and onto smartphones.

IDC recently predicted that smartphone shipments in China would exceed those of feature phones next year, although it will be some time longer before installed user numbers do the same. ®